i would also consider if paying a loan off would entail significantly depleting my 'liquid emergency fund'.
If I were young /just starting out, I'd focus equally on paying off debt and building an emergency fund. Once the emergency fund was in place, then I'd double-down on paying off the debt and starting on retirement savings. And, it goes without saying, I'd avoid adding to the debt.
I was raised to pay cash for everything. My parents managed to do that, even paying $2,500 cash for their first home! More of a shack on 5 acres, but they lived within their means. In reality, I couldn't do it, so I have paid off everything as quickly as possible.
I don't understand the obsession with credit scores. Improving credit scores has spawned an entire industry. I'm 65 and never thought about my credit score, I just know it always was high enough to qualify for the lowest loan rates. My bank started putting customers credit scores on their website about 5 years ago, so I do now know what it is. But I never intend to apply for credit again in my life, so I don't care.
I would pay it off. I played the game of trying to figure out tax advantages, and potential investment gains, and to be honest, my debts were low enough that using the money to pay off the debt really didn't cost me much if anything.
I can relate to much of this:
- I wasn't necessarily raised to pay cash, but I was raised not to buy anything I wouldn't be able to pay off at the end of the month. The only exceptions being houses and cars.
- My parents paid $5000 for their first house -- it was a tiny two-bedroom in a really bad neighborhood.
- I never pay any attention to credit scores; instead, I focus on financial stability, which isn't the same thing at all.
All that said, you need to do what helps you sleep best at night.
I grew up in a house that wasn't financially stable, and we were always worried about food, utilities, clothing ... everything. It was an incredibly stressful (and shameful) way to grow up, and I always knew I wanted to live differently as an adult.
There are plenty of legitimate reasons why people (in general, not just you specifically) need to have good credit scores.
1. It allows you to connect utilities (gas, water, electric) without needing to hand over a cash deposit.
2. It allows you to rent an apartment that is owned by a large company.
3. It makes you a more attractive tenant to a private landlord, and makes it easier to secure a rental.
4. It makes you an attractive client for banks for all types of loans: car, business, personal.
5. If you happen to be a military member who needs a Secret Clearance, a good credit score is essential to obtaining/maintaining it.
6. If you are a private citizen (non military) working for a Government contractor or the DoD in some capacity, who holds a Top Secret Clearance, you need to maintain a high credit score and a pretty immaculate credit profile. Losing your TSC usually means losing your job.
There are probably other things I'm not thinking of, but ignoring your credit score or failing to establish a credit profile can be very limiting in life.
I accept that these things are important to young people who are just starting out, but they mean little-to-nothing to me:
- I've been paying utilities since college (that was the late 80s), so I don't need to put down a deposit.
- I am a homeowner and don't foresee renting an apartment /house, but IF I needed to do so, I could easily pay a year's rent in one lump sum. That would make me a pretty attractive client.
- I don't anticipate taking out a loan again, but, if I were to do so, the bank tends to look positively at a paid-for home, a small business, money in their coffers (and having had a banking relationship with the same bank since I was 17).
- I'm retired and may work here or there occasionally, but I'll never look for a clearance of any type.
- Someone might mention insurance. I've been with the same insurance company since I was 16. I think that counts more than my credit rating.
Again, I totally agree that a credit score matters to a young person -- though not nearly as much as working towards financial security -- but it doesn't matter much to me personally.
Your question 
